Sequester Cuts Disproportionately Affecting Small Businesses?

Posted on: April 29, 2013

There have been many effects from the mandatory budget cuts required by the recent sequestration in Washington, D.C., and now it appears as if small businesses have been hit harder by these changes than many other types of companies.

There seems to have been an uptick in small business layoffs and other issues for these independent firms since the sequester went into effect, and as such many federal lawmakers are now trying to see what can be done to reverse the effects causing these difficulties, according to a report from the Capitol Hill news site Politico. For instance, the federally-run Small Business Administration says that it has had to dial back lending through its most popular program, which could have a huge impact on growth in the sector for some time.

"The small businesses are going to be the ones that feel the most immediate affects as these government budget cuts come down, because contrary to popular notion, government spending does affect private-sector jobs," U.S. Sen. Mary Landrieu, a Democrat from Louisiana and the chairwoman of the Small Business and Entrepreneurship Committee, told the site. "Government spending isn't just spent within the government for government employees. Much government spending is passed through to the private sector."

An economist projected that nationwide, there could be nearly 1 million jobs with small businesses at risk as a direct result of these spending cuts, the report said. But moreover, they might give pause to owners who may have been considering hiring in the near future, which could unfortunately slow economic recovery at a time when owners have already grown increasingly pessimistic about their chances for growth over the next few months.

These issues can compound many of the difficulties already facing small businesses as they attempt to expand their payrolls or increase their reach in their communities. For instance, many may already be facing rising costs for all types of small business insurance policies, including workers' compensation insurance and general liability insurance, which can grow even as businesses do not do so. Those looking to expand will therefore likely have to keep in mind not only the effects that sequestration might have on their ability to do so, but also how these added insurance costs will alter their bottom lines going forward.